Grain Silos & Flour Mills Organization (GSFMO) Kingdom of Saudi Arabia

Wheat and Flour Market in Saudi Arabia

By H.E. Eng. Waleed El Khereiji

Director General of Grain Silos & Flour mills Organization

Opportunities for the agricultural Sector and Food Industry Moderator

(16-18th September 2013)

I GSFMO Background & Overview

II KSA Wheat & Flour Market Overview

III GSFMO Privatization Program

IV Facts and Opportunities for cooperation Between

Saudi Arabia&

USA in agriculture and food sector

V Conclusion

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GSFMO is a national institution that aims to supply wheat and flour to the entire population of the Kingdom of Saudi ArabiaGSFMO Overview Objectives

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GSFMO fulfills its mandate through managing the full wheat and flour operating sector chains

Purchase wheat from local farmers according to a set price until 2015 and import the remaining demand from international suppliers for KSA. Also it operates all the flour mills in Saudi Arabia and ensure adequate investments to maintain enough supply to satisfy the growing demand.

Manage all wheat storage operations in KSA, both strategic and operational storage, in order to satisfy the increasing demand

Enforce food quality regulations at the point of purchase in storage silos and import tenders, such as protein content, weight, moisture, falling number, etc.

Implement directives by the Ministry of Health & Saudi Food and Drug Authority regarding food additives, e.g. vitamin D, Folic Acid, etc.

GSFMO Roles and Responsibilities

GSFMO (Roles & Responsibilities)MillingStorage

Operating Sector Chains

Transpo-rtation

ProcurementDistribution and Sales

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GSFMO Involved

Production

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GSFMO operates 11 branches with total capacity of ~11430 MT/day of flour milling, ~2.5 MMT for wheat storage and ~2900 MT/day for feed

GSFMO Flour Mills, Silos and Feed Mills Capacities

Flour Mills Capacities(MT/day) (2013)

Silos Capacities(000’ MT) (2013)

Feed Mills Capacities(MT/day) (2013)

900

1,650

Madina

Khamis

Mushait

Tabuk 600

600

Hail

Riyadh

Dammam

2,550

Qassim

600

Jeddah

Jawf

1,350

600

2,580

Total 11,430

Qassim 485

Hail 300

Kharj 200

Jeddah 120

Jawf 100

Tabuk 100

Dammam 80

Madina 60

Khamis

Mushait 40

Wadi El

Dawaser

Riyadh

500

535

Total 2,520

Khamis

Mushait 1,400

Qassim 600

Dammam 300

Jeddah 300

Riyadh 300

Total 2,900

GSFMO Presence across Saudi Arabia

Riyadh

Kharj

Jeddah

Hail

Madina

Qassim

Najran

Jazan

Northern Province

Khamis Mushait

Jawf

Wadi El Dawaser

TabukDammam

Flour Mill Silo Feed Mill

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New plants and expansions

GSFMO Flour Mills, Silos and Feed Mills New Expected Capacities

Flour Mills(MT/day)

Silos (000’ MT)

Feed Mills(MT/day)

600

Madina

Al ahsa

Kharj

150

600

Jumoum

600

Jeddah

Jazan

1,200

600

Total 3,750

140

140

Eastren Region

Yanbu 120

Dheba

Jazan

120

120

Khamis

Mushait 80

AL ahsa 60

250

Total 1,150

Hail 300

Jawf 300

Tabuk 300

Madina 300

Kharj 300

Total 1,500

New plants and Expansion

Kharj

Jeddah

Hail

Madina

Jazan

Northern Province

Khamis Mushait

Jawf

TabukDammam

Flour Mill Silo Feed Mill

120

Jeddah

Dammam

Jumoum

Duba Port

AL ahsa

JumoumYanbu Port

Eastren Region

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GSFMO offers a wide range of Flour products, Feed products and other Wheat Derivatives to its clients

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Flour Products GSFMO produces varieties of flour:

– Powder flour (75-80% Extraction)– Fine flour (70-74% Extraction)– Ordinary Flour (85% Extraction)– Whole Wheat Flour (95% Extr.)

Feed Products GSFMO produces feed-pound (50

kilograms) of high-quality poultry feed and livestock feed (fattening / double), in addition to other feed products

Other Wheat Derivatives GSFMO produces a number of

wheat derivatives including:– Jareesh– Harees– Bran for Human consumption

GSFMO Products

GSFMO Products

0.00

0.400.60

0.800.781.10

1.28

0.94

1.72

3.40

2.902.70

2.40

2.021.971.951.92

0.30

2008 2009 2010 2011 2012 2013 2014 2015 2016

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GSFMO is gradually shifting towards 100% imports of international wheat by 2016

GSFMO Wheat SupplyLocal Wheat Vs. Imported Wheat Supply

(MMT) (2008 – 2016)

Local Wheat Imported Wheat

Local Wheat (%)

85% 33% 40% 36% 28% 25% 18% 12% 0%

Imported Wheat (%)

15% 67% 60% 64% 72% 75% 82% 88% 100%

Comments

In 2008, the Saudi government adopted a new policy to gradually reduce domestic wheat growing due to water scarcity

The new policy envisaged replacement of domestic wheat procurement through imports; by 2016 all of the Kingdom’s wheat demand will be met by imports

GSFMO started applying the new policy in 2008 by importing 303 thousand tons of wheat; this quantity was increased six fold in 2009 to reach 1.92 MMT

On the other hand, the local procurement of wheat was decreased from 1.72 million tons in 2008 to 778 thousand tons in 2012

Historical Planned

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GSFMO ensures its wheat supply from several countries and is currently looking to expand its imports base to include Hard & Soft wheat

GSFMO Imported Wheat – By Country(Percentage) (2008-2013 till July)

52%

20%

Canada

Australia

Argentina

USA

European Union

GSFMO Sources of Wheat

Import of Hard & Soft Wheat

GSFMO imports hard wheat & it has opened up new channels for soft wheat exporters.

Saudi Arabia is studying local consumer demand to assess potential needs for soft wheat, which is suited for products such as biscuits, and accordingly, GSFMO will gradually increase imports of soft wheat

Saudi flour mills were traditionally built to process hard wheat, but the newly established flour mills are able to handle both hard and soft wheat

Brazil

GSFMO Background & Overview

II KSA Wheat & Flour Market Overview

GSFMO Privatization Program

Facts and Opportunities for cooperation Between

Saudi Arabia&

USA in agriculture and food sector

Conclusion

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KSA’s population is expected to grow at 2.4% per annum reaching a total of ~40 Million in 2025

Saudi Population Growth(Million) (2004 – 2025)

2024

38.6

2023

37.7

2022

36.8

2021

35.9

2020

35.1

2019

34.3

2018

33.5

2017

32.7

2016

31.9

2015

31.2

2014

30.4

2013

29.7

2012

29.0

2011

28.4

2004

24.2

2.4%

2025

39.6

Historical Forecast

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KSA average daily caloric intake is 14% above the world average resulting in higher flour consumption habits

Average Caloric Intake Benchmarks(Cal/Capita per Day)

Russia

KSA

Egypt

Jordan

Chile

World

Indonesia

Peru

India

Sudan

Korea

Yemen

USA

Portugal

Canada

+14%

France

Germany

Portugal

Germany

Jordan

USA

Chile

World

Egypt

+8%KSA

Russia

India

Yemen

Peru

Korea

Sudan

Indonesia

France

Canada

Average Flour Consumption Benchmarks(Cal/Capita per Day)

Saudi Arabia is Higher than world average by 14% Saudi Arabia is Higher than world average by 8%

+35.6%

-2.7%

ForecastHistorical

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In 2025, flour demand in Saudi Arabia is expected to reach 3.6 MMT which is equivalent to around 4.5 MMT of wheat demand

3.6

2024

3.5

2023

3.4

2022

3.3

2021

3.2

2020

3.1

2019

3.0

2018

2.9

2017

2.8

2016

2.7

2015

2.6

2014

2.5

2013

2.5

2012

2.4

2011

2.3

2005

2.0

3.2%

2025

2.9%

ForecastHistorical

2021 20242023

4.2 4.5

2022

4.3

2.5

4.14.0

2020

3.8

2019

3.7

2018

3.6

2017

3.5

2016

3.4

2015

3.3

2014

3.2

2013

3.1

2012

3.0

2011

2.9

2005

2.9%

2025

3.2%

Yearly Flour Demand Forecast

(MMT/Year)(2012 - 2025)

Yearly Wheat Demand Forecast

(MMT/Year)(2012 - 2025)

Flour and Wheat Demand in KSA

GSFMO Background & Overview

KSA Wheat & Flour Market Overview

III GSFMO Privatization Program

Facts and Opportunities for cooperation Between

Saudi Arabia&

USA in agriculture and food sector

Conclusion

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In line with the Government strategy, GSFMO is now embarking on a privatization program…

Privatization in KSA

Government’s Strategic Objectives

Improving the efficiency of the national economy and enhancing its competitive ability to meet the regional and international challenges

Encouraging private sector investment and effective participation in the national economy, and increasing its share of domestic production to achieve growth in the national economy

Expanding the ownership of productive assets by Saudi citizens

Encouraging (national and foreign) local investments

Increasing employment opportunities, optimizing the use of the national work force, and ensuring the continued equitable increase of individual income

Reducing public expenditure and reducing the burden on the government budget by giving the private sector opportunities to finance, operate, and maintain certain services that it is able to provide

Sectors Targeted For Privatization

Gov. shares in Arabic/ Islamic

Investment Companies

Agricultural Services

Airport Services

Industrial Cities

Services

Government shares in

Public Companies

Wheat Mills and Storage

facilities

Air Transportation and Related

Services

Municipal Services

Government Hotels

Desalination Port ServicesEducation Services

Sports ClubsWater and Sewage

CollectionHighways

Telecom Services

Health Services

Social Services

RailwaysPostal

Services

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4

5

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GSFMO Scope of Privatization

SalesMillingStorageTransportationProcurementValue Chain

Current Players

GSFMO (imports) Private FarmersPrivate agriculturalDevelopment companies

Grain Silos Flour Mills Organization (GSFMO)Sudais, Al-Mousallam, ARASCO, Al-Habbad, Al-Shorreih …

Assumed to remain public

Government assumed to continue to perform procurement role

Leverages purchasing power and ensures availability of wheat

PrivatizationPotential?

Rationale

GSFMO currently is the sole entity performing storage and milling activities

All milling, sales and some storage activities will be privatized

Status

Scope of GSFMO Privatization

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Post-privatization, GSFMO will regulate the entire wheat & flour sector and manage the wheat strategic reserve for KSA

ILLUSTRATIVEGSFMO Current Vs. Future Role

Current State – Pre-privatization Future State – Post-privatization

Silo Operations

Flour Mill Operations

Feed Mill Operations

GSFMO Current Scope of Work GSFMO Future Scope of Work

Wheat-sector Regulatory Function

Flour Mill Operations

Feed Mill Operations

Strategic Reserve – Silo

Operations

Operational Reserve – Silo

Operations

Private Companies’ Scope of Work

Comments

GSFMO is expected to privatize only part of its grain storage silos – the minimal capacity needed to ensure smooth milling operations of the flour mill companies; the remaining storage capacity will be retained by GSFMO (for strategic reserve purposes)

In the future, GSFMO is expected to undertake the role of wheat-sector regulator, entailing:– Setting regulations related to food quality– Inspecting flour mills to ensure compliance with quality regulations– Regulating the competition among the private flour milling operators– Ensuring that the market structure fosters fair competition amongst operators in the sector

New Function

GSFMO Background & Overview

KSA Wheat & Flour Market Overview

GSFMO Privatization Program

IV Facts and Opportunities for cooperation Between

Saudi Arabia&

USA in agriculture and food sector

Conclusion

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Facts and Opportunities for cooperation Between Saudi Arabia& USA in agriculture and food sector

Facts Opportunities

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GSFMO Background & Overview

KSA Wheat & Flour Market Overview

GSFMO Privatization Program

Facts and Opportunities for cooperation Between

Saudi Arabia&

USA in agriculture and food sector

V Conclusion

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ConclusionUSA Companies and institutions are welcomed to collaborate with GSFMO in

Participation in Hard &Soft Wheat

tenders

Privatization Program

I II III

Employee development

III

Thank You

www.gsfmo.gov.sa

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